(Bloomberg) — The financial crisis threatening Texas’s power market is in the hands of lawmakers after Governor Greg Abbott asked them to rule on rescinding $16 billion in overcharges during last month’s blackouts.
The Republican governor ordered legislators to debate whether state regulators should direct the region’s grid operator to retroactively adjust prices to correct the overcharges highlighted by an independent monitor. It comes after regulators declined to reverse the charges themselves.
Rolling back the power prices would ease the financial squeeze on companies facing astronomical bills in the wake of the energy crisis that left millions of people in the dark and dozens dead during a historic winter storm. The state’s power market faces a $2.4 billion shortfall and at least two electric companies have filed for bankruptcy.
“Correcting this $16 billion error will require an adjustment, but it is the right thing to do,” Texas Lieutenant Governor Dan Patrick said in a statement posted on his website. “It will ultimately benefit consumers and is one important step we can take now to begin to fix what went wrong in the storm.”
See also: Texas Watchdog Says Grid Operator Made $16 Billion Error
As the mid-February storm knocked almost half of Texas’s power generation offline, the state’s grid operator set the price of electricity at the $9,000-a-megawatt-hour maximum. That’s standard practice during an emergency. But the grid operator — the Electric Reliability Council of Texas, or Ercot — left that price in place days longer than necessary, resulting in massive overcharges, according to Potomac Economics, an independent market monitor hired by the state to assess Ercot’s performance.
In an unusual move, the firm last week urged regulators to reverse the $16 billion in excessive charges. But regulators declined.
“Decisions were made about these prices in real time based, on information available to everybody,” Arthur D’Andrea, chair of the Public Utility Commission of Texas, said during a March 5 meeting. “It is nearly impossible to unscramble this sort of egg.”
Texas’s biggest power generators have generally opposed any kind of repricing, saying it could discourage future electricity-market investments. But some retail electricity providers that racked up huge bills in the crisis are eager for relief.
On Tuesday, Just Energy Group Inc. a Canadian retail energy seller that serves Texas, filed for court protection in Canada and bankruptcy in the U.S. after suffering crushing losses in the blackouts. Its shares plummeted as much as 74% Wednesday, and trading was briefly halted.
Also See: Texas Power Crisis Pushes Just Energy to Court Protection
Shares of Vistra Corp., a power generator that serves Texas, rose as much as 3% Wednesday as the broader market rallied. NRG Energy Inc. fell as much as 1.2%.
All Options
Rayburn Country Electric Cooperative, a non-profit generation and transmission cooperative that serves northeast Texas, is expecting $735 million in invoices from Ercot and says its customers can’t afford to pay. The cooperative has declared force majeure, Chief Executive Officer David Naylor said in a telephone interview late Tuesday. “We are looking at all of our options,” he said.
The handling of the crisis has already prompted the exits of a number of key officials, including Ercot’s Chief Executive Officer Bill Magness.
(Adds share prices beginning in ninth paragraph.)
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